* Malaysian election called on Wednesday
* Borneo's vanishing rainforests becoming an issue
* Borneo states of Sabah, Sarawak key to election
* Sabah chief minister under cloud over timber graft
* UBS bank probed for money laundering over these
* Sarawak chief minister also investigated for timber graft
By Niluksi Koswanage
KOTA KINABALU, Malaysia, April 3 The island of
Borneo may be all that stands between Malaysian Prime Minister
Najib Razak and an unprecedented election defeat within weeks
for his ruling coalition.
Borneo's two Malaysian states -- Sabah and Sarawak -- have
been a bastion of votes for the National Front coalition headed
by Najib's party, the United Malays National Organisation
The two states, among Malaysia's poorest despite vast
natural resources, kept the National Front in power in 2008 even
as a groundswell of support for the opposition deprived the
government of its iron-clad two-thirds parliamentary majority.
That could start to change. Allegations of corruption in
recent months have dogged the chief ministers of both Sabah and
Sarawak, long-time rulers who hold vast sway over some of the
world's largest tracts of tropical forests.
The National Front is favoured to win the election expected
on April 27 after Najib dissolved parliament on Wednesday. But
it could be the closest his ruling coalition has faced in its
56-year rule. Corruption scandals threaten to undermine one of
Najib's central messages -- that he is making Southeast Asia's
third-largest economy more transparent and competitive.
Sabah Chief Minister Musa Aman, who is also the state's top
UMNO official, has been under scrutiny the past year after
whistleblower website Sarawak Report published documents from
the Hong Kong and Malaysian anti-corruption agencies.
The two agencies started investigating Musa in late 2008.
The probe was based on a tip-off that the chief minister was
extracting money from businessmen seeking timber concessions and
funnelling it to UBS bank accounts in Hong Kong and Singapore,
sources close to the investigations said. They declined to say
who gave the tip-off.
The Hong Kong anti-graft agency froze a UBS account managed
by a lawyer on behalf of Musa, the sources said, and began a
joint investigation with its Malaysian counterpart.
The agencies closed the case three years later and unfroze
the funds after the Malaysian government publicly said the money
was donations for UMNO, not bribes. The Malaysian government has
not explained why political donations had to be routed through
Hong Kong and Singapore.
Musa told Reuters in a statement that he has been cleared by
both anti-graft agencies. However, an independent panel
overseeing the Malaysian graft agency has recently requested the
case be reviewed.
"These are the same old stories, rehashed over and over
again," Musa said. "It is just the usual silly season before the
general election, when the opposition gets up to their usual
The opposition, which argues the fruit of Malaysia's brisk
economic growth is largely concentrated in the hands of a
well-connected elite, has vowed to keep pouring it on.
"How Musa manages Sabah in favour of the government rather
than the people will certainly be a prominent part of election
rallies on the opposition side," said Lim Kit Siang, a leader in
the opposition coalition headed by former deputy prime minister
HONG KONG TIMBER ACCOUNTS
The Hong Kong anti-graft agency told Reuters it investigated
a number of Malaysian nationals, including a government
official, for breaching the prevention of bribery ordinance in
connection with the UBS accounts. It neither confirmed nor
denied that Musa was the focus of the investigation.
Malaysia's anti-corruption agency said it provided
assistance to its Hong Kong counterparts but declined to give
details. Malaysian anti-corruption officials, speaking on
condition of anonymity, told Reuters the leaked documents
obtained by Sarawak Report were genuine and Musa was, indeed,
the focus of the investigation.
Sarawak Report said the Hong Kong and Malaysian anti-graft
agency documents it acquired showed that $90 million in illegal
logging proceeds from Sabah were channelled to the UBS accounts.
That prompted Swiss prosecutors to open a criminal money
laundering probe into UBS last August.
The investigations into UBS and its relationship with Musa
are continuing, a spokesman for the Office of the Attorney
General of Switzerland said. UBS said it was fully cooperating
with the authorities but declined to give more details.
As chief minister, Musa is in charge of the Sabah
Foundation, which manages a state forest reserve covering 3,861
square miles, nearly half the size of New Jersey. The foundation
allows timber companies to annually log a tiny fraction of that
area. The logging proceeds are supposed to fund education and
welfare projects in the state.
As chief minister, Musa signs off on all the logging permits
that its board of directors agree to award to timber firms, or
at least in one case, to a family member.
One of the Malaysian anti-corruption agency documents listed
companies that won permits from the foundation. It shows the
foundation awarded 2,000 hectares (7.7 sq miles) of primary
forest to Musa's younger brother, Foreign Minister Anifah Aman,
at a special board of directors' meeting on May 7, 2004.
The same Malaysian anti-graft document shows Musa
consistently signed off on concessions that exceeded, or even
doubled, the allowable timber cut. While not illegal, it shows
the state was exceeding its own guidelines on deforestation.
Some of the companies on that list made payments into a UBS
corporate account belonging to a former Musa associate, bank
statements on the account obtained by Reuters shows. From the
same account, withdrawals were made by the associate to fund
Musa's sons who were studying in Australia, the statements show.
Two timber firms in Sabah transferred two payments totalling
$4.04 million on August 16, 2006 into the corporate UBS account
belonging to the former Musa associate. Six days later on Aug.
22, the exact same amount was transferred into a personal UBS
account belonging to Musa's lawyer. The Hong Kong anti-graft
agency described that account as "held in trust" for Musa,
according to the bank statements and investigation documents.
That same day, the firms won a 32,000 hectare (124 sq miles)
timber concession and a contract to maintain a road to a logging
camp, according to the Malaysian anti-graft agency document.
The owners of those two timber firms confirmed to Reuters
that the $4.04 million transactions were "donations" to Musa and
UMNO to secure the contracts. They requested their names and the
names of their firms not be identified.
Malaysia's government has said all the funds in that UBS
account were ultimately sent to UMNO as political donations.
Other firms on the list of companies that received timber
concessions could not be reached or declined to comment.
LESS LOGGING REVENUES
While there is no published data on how much forest has been
cleared within the Sabah Foundation forest reserve, official
data shows significant deforestation throughout the state.
In 1992, the state's total forest cover stood at 17,000
square miles, about half the size of Ireland. By 2011, it had
shrunk to 13,900 square miles, based on the latest available
data from the forestry department. Primary or virgin forests
have been particularly hard-hit, declining from 1,595 square
miles in 1992 to just 348 square miles in 2011.
With diminishing forests left to cut, logging revenues fell
by half over five years to less than 250 million ringgit in 2011
Musa has made a push for Sabah to diversify into agriculture
and oil and gas, which helped state budget revenues hit a record
4.1 billion ringgit last year. But the state's unemployment rate
remains at 5.4 percent, the highest of any state in Malaysia,
where the national average is 3.0 percent.
Musa's popularity ratings have declined as well, to 45
percent in 2012 from 60 percent in 2009, according to a survey
by the Merdeka Centre, Malaysia's most respected pollster.
Law Minister Mohamad Nazri Aziz told parliament last October
the funds in the UBS bank account held on behalf of Musa were
political donations, without giving details about the source of
the money or explaining why such funds had to be routed through
Based on evidence submitted by the Malaysian anti-graft
agency, Malaysia's attorney-general found no indication of
corruption or linkages with the Swiss government's investigation
into UBS, Nazri said.
But an independent panel overseeing the Malaysian anti-graft
agency has since written to the attorney-general requesting a
review of his decision to close the case on Musa, a high ranking
anti-graft official said at a public forum held by the Bar
Council. The official did not disclose why the review was
requested and declined to respond to Reuters requests for
The attorney general did not respond to requests for
As UMNO's party leader in Sabah, Musa is expected to find
ways of raising money for the party - and to get out the vote.
"For UMNO, Musa is almost indispensable in Sabah. You lose
him, you may lose your whole regime," said Oh Ei Sun, senior
visiting fellow with Singapore's Nanyang Technological
University and a former political secretary to Prime Minister
NAJIB AT RISK
The opposition, campaigning on an anti-corruption platform,
is banking on winning 20 seats in Sabah and Sarawak in the
election, which could put it within sight of a 112-seat simple
majority in parliament.
Sarawak has also been under the spotlight over allegations
of timber corruption. The Malaysian anti-corruption agency said
it has been investigating Sarawak Chief Minister Abdul Taib
Mahmud since 2011 in response to environmental activists'
complaints about corruption in the forestry industry. That
investigation continues and any new evidence will be taken into
account, the agency spokesman said.
He was referring to environmental activist group Global
Witness, which posted a video in March that went viral. It
showed Taib's cousins and associates apparently offering
thousands of hectares of forest land to the group's undercover
investigators and formulating plans to book the land sales in
Singapore to avoid Malaysian taxes. The cousins could not be
reached for comment.
Taib publicly denied the allegations raised as a result of
the video. "I saw the so-called proof. It has nothing to do with
me," he told local media. "Everything has to be done with
In an interview with Reuters last Tuesday, Prime Minister
Najib declined to discuss details of the investigations into the
Sabah and Sarawak chief ministers, and said he was against
corruption in "any form."
Asked about the Global Witness video, Najib said: "It's ok,
everything will be investigated, and due process will take its